Smiths News H1 Earnings Call Highlights

Key Points

• Smiths News reported a broadly in‑line first half with adjusted operating profit of GBP 18.3m, revenue down 3.9% and EPS down 3.7%, while free cash flow rose to GBP 21.2m and the group moved to a GBP 7.8m net cash position, supporting an unchanged interim dividend of GBP 0.0175 per share.
• Growth was driven by Collectables (up 13.3%) and "growth verticals" (up 35%), notably recycling which rose >50% year‑on‑year, helping offset a c.4.1% decline in core newspapers and magazines that still represent over 90% of revenue.
• Smiths sees a material opportunity from the UK Deposit Return Scheme (DRS) due in late 2027—estimating ~70% of its convenience/independent estate may be required as return points—and is exploring partnerships (eg Exchange4Change) though no contract has yet been awarded.

Smiths News LON: SNWS reported what management described as a “positive performance” for the 26 weeks ended February 28, 2026, with the company expecting full-year results to be in line with market expectations. Chief Executive Officer Jonathan Bunting said the group delivered adjusted operating profit of GBP 18.3 million and adjusted profit after tax of GBP 12.7 million, supporting an interim dividend of GBP 0.0175 per share.

Financial performance and cash generation

Chief Financial Officer Richard Clay, who joined the company in February, said revenue declined 3.9% over the period, consistent with the company’s guidance range of a 3% to 5% decline. He said revenue from newspapers and magazines decreased by “just above 4%,” while revenue increased in Collectables and the company’s growth verticals.

Adjusted operating profit fell by GBP 1.1 million to GBP 18.3 million, which Clay attributed to the annualization of national insurance contributions since April and “ongoing investments in our cost base.” He said Collectables performance, including Pokémon, and the benefits of cost reduction plans partially offset inflation and lower income from newspapers and magazines.

Below operating profit, Clay said net finance charges were GBP 0.4 million lower than last year as the company was in a net cash position for much of the first half. Profit before tax declined 4% to GBP 17.0 million, and earnings per share decreased 3.7% to GBP 0.052. The board approved an interim dividend of GBP 0.0175 per share, consistent with last year, payable in July.

Free cash flow was GBP 21.2 million, up GBP 7.9 million year-over-year, including what Clay described as a working capital timing benefit of GBP 7.6 million as part of the “normal working capital cycle.” He added that ordinary and special dividends totaling GBP 16.7 million were paid in February, at the end of the reporting period. On a 12-month rolling basis, Clay said the business moved from GBP 12.4 million of net debt a year earlier to a GBP 7.8 million net cash position at the half year, and that the average net cash position for the half was GBP 16.2 million.

Segment trends: print, Collectables, and growth verticals

Clay said newspapers and magazines remain the dominant contributor, representing over 90% of total revenue, and the 4.1% decline in these products drove overall performance. Collectables revenue increased 13.3% compared with the prior half year, and revenue from growth verticals rose 35%, helped by higher recycling revenue.

Bunting said the company has “secured 96% of our newspaper and magazine revenues to 2029 or beyond,” following a long-term contract renewal with Guardian Media Group. He described the newspaper and magazine business as resilient and tracking broader print market trends, noting that cover price inflation continues to benefit the company’s commercial model.

In Collectables, Bunting said demand remained strong, driven by Pokémon and supported by the company’s work to secure additional retailers, including national supermarket customers. He also said the company has begun a trial of “another Japanese anime card game,” though he added it was “too early to talk about” details. Management also highlighted upcoming trading tied to the men’s FIFA World Cup, which typically provides a “one-off boost” in the second half and contributes to a second-half profit weighting.

On recycling, Bunting said revenue rose more than 50% year-over-year under new Managing Director Adam Willmott, alongside the launch of new services including recycling for vapes and small WEEE, and a coffee cup collection trial for a national high street chain. He said the business is strengthening ties with waste brokers to unlock additional routes to market.

Deposit return scheme (DRS) opportunity and customer adoption

Bunting said regulation could play a key role in the recycling vertical’s development, pointing to the U.K.’s planned deposit return scheme (DRS), due to launch in late 2027. He described DRS as applying a refundable deposit to single-use drinks containers—an estimated 25 billion units—covering plastic bottles and aluminum and steel cans. He said Smiths News estimates 10% to 15% of containers will return via manual return points, requiring collection, scanning, and recycling so retailers can receive credit.

He said the company believes around 70% of Smiths News convenience stores and independent retailers will be obliged to become a return point, creating a potential opportunity given the overlap with the company’s footprint and its ability to process returns at final mile depots. Bunting said Smiths News is exploring an opportunity to partner with Exchange4Change, but noted the company is still at the tender stage and has not been chosen as a partner.

In the Q&A, Bunting added that because DRS does not go live until autumn 2027, there is no implementation feedback yet. He said participation can be a footfall driver for retailers and suggested part of Smiths News’ role, if successful, would be educating customers on DRS and how the company could support them.

On vape recycling, Bunting said the company launched its service “only a few weeks ago” and identified education as the biggest barrier to adoption. He said some retailers are unaware of legal obligations to provide a recycling solution when selling vapes above certain thresholds, and management was “pleased with the response” in the early weeks of selling the proposition.

Costs, contracts, and capital allocation questions

In response to questions on contract negotiations, Bunting said Smiths News typically faces one direct competitor, InPost News Trade (formerly Menzies Distribution), along with indirect competition from other distribution companies. He said publishers evaluate tenders based on several factors, including vision for the category and service evolution, price, track record, and relationship.

Clay addressed questions on fuel and energy costs, saying the company has seen “negligible impact” from sustained higher diesel prices so far, though some increases have been observed in trunking and fuel can be part of contractor negotiations. He added that energy costs are hedged over the short to medium term, and the company has not seen a material impact to date.

Clay also discussed capital allocation topics, including why the company has favored special dividends over share buybacks in the past. He said the board evaluates shareholder needs and will keep options under review, while continuing to assess trading cash generation alongside investment needs across the business. Asked about managing a net cash position, he emphasized focusing on average cash versus closing cash due to large working capital movements, and reiterated that the company’s capital allocation policy remains consistent with prior communication.

Regarding interest earned on cash, Clay said the company has a liquidity facility “earning well” but does not disclose the rate. He noted that a large proportion of interest expense relates to leases, meaning interest earned on cash does not “dramatically” change the overall interest expense line.

Looking ahead, Bunting said the company has made “a pleasing start to 2026” and remains on track to meet full-year expectations. He said Collectables are expected to perform strongly, supported by the anticipated FIFA World Cup boost in the second half, and added that the business remains on track to deliver operational efficiencies across FY2026 “in excess of GBP 4 million.”

About Smiths News LON: SNWS

In 1792 we started delivering the nation's newspapers. Today, we're proud to be the UK's largest wholesaler of newspapers and magazines, serving 24,000 retailers from superstores to corner shops. Service and efficiency put us at the forefront of our industry and with 55% market share we are the leading player in one of the world's fastest-moving supply chains. Our teams go further, when others stop, striving to meet the highest standards in all we do.

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